From Empire to EU

At the beginning of the 20th century, Britain, including southern Ireland, was one of the world’s principal trading nations.

The main markets for British goods were those with which it had preferential trade arrangements: the Empire and former colonies. In 1908, exports of goods to the Commonwealth countries of Australia, Canada, India, New Zealand and South Africa accounted for around a quarter of the total, and British India was the UK’s largest single market. The US accounted for almost a tenth of all exports; while estimates of exports to the current EU countries suggest they accounted for a further four tenths, not dissimilar from the figure today (UK exports to the EU were 53% of the total in 2011).

In 1948, despite the demise of the Empire, the Commonwealth had become a still more important market for UK goods, accounting for almost a third of all exports. An independent Ireland now accounted for a twentieth share and South Africa was the single largest export market. The devastation in Europe meant demand for UK goods dwindled: exports to EU countries represented just a quarter of all exports in 1948.

By the end of the 20th century, the UK’s preferential trade arrangements with its former colonies had been replaced by those with the EU, and the US was now the UK’s largest market for goods and services. Exports to the selected Commonwealth countries accounted for less than those to Ireland alone – as, more surprisingly, did exports to the developing BRIC countries of Brazil, Russia, India and China combined.

The UK’s lack of export competitiveness and widening trade deficit is a cause for concern today, but it is far from historically unusual. Imports exceeded exports (by value) for 32 consecutive years between 1924 and 1955 and the UK has run a deficit for 78 of the 111 years since 1908. During WWII, the collapse in demand for exports, together with the rebalancing of production towards the War effort, resulted in the UK importing £2-worth of goods for every £1 it exported. By 1940, the UK Balance of Trade had increased to an eighth of UK GDP; the figure in 2011 was just under 2%.

The UK has long imported more than it exportsThe chart shows the UK’s balance of trade (exports minus imports) as a percentage of national output, for selected years since 1900.